March 2011 | Outsourcing Blog | BPO Industry Updates and Articles

Do not Rush to get to the Cloud

From a mere buzzword, cloud computing has been slowly maturing into a viable business tool in the global marketplace. Last year, cloud computing became mainstream as an increasing number of companies engaged with various cloud computing service providers to study how they can benefit from the “cloud”.

Consultancy firm TPI warns companies that in their rush to get to the “cloud”, more problems can crop up rather than solutions. Some companies are easily confused with the “Cloud” and Software-as-a-Service (SaaS). “These terms have become so pervasive that they are almost indistinguishable from the software itself,” comment TPI’s Stanton Jones and Bobby Neil.

The duo says there are many applications that are being introduced into the market as SaaS. In truth, though, Jones and Neil opine that these are merely repackaged versions of old applications that have been morphed into hosted or “on-demand” software.

How do you know whether the app offered to your company is a true SaaS? They offer the following rules of thumb:

The service includes new features, and updates are delivered often. A true SaaS has one single code base designed to service multiple clients. The “multi-tenant” architecture means “you share the application software and hardware with other customers.” With one code base to manage, updates are rolled out in a span of weeks and months, compared to years for “traditional” software.

“Cloud” service means mobility. SaaS applications benefit from the newest Internet technologies, which have focused on easy and fast access, especially while on the move. A true SaaS application is ready to take on the hypergrowth in mobile computing and the consequent surge of a global, virtual workforce.

Pay only for what you use. Most SaaS applications are priced by usage - terms are negotiated as to the number of users and the amount of bandwidth and storage used. If you were to host your own server or deploy highly-customized software, you would be saddled by software, hardware, and maintenance costs - not to mention the technical staff that you’d need to employ. A true SaaS enables you to either ramp up your storage or rapidly scale down your use.

Standardized dashboard allows for configurations, not customizations. Most SaaS applications are controlled via a dashboard accessible through a Web browser. This dashboard is the same for all customers. Jones and Neil say that “it’s important to make sure your requirements can be met via available configuration options rather than deep customization.” Some SaaS will definitely be unable to provide you the specific services you need.

Flexible price terms make for different service level agreements. Since majority of SaaS suppliers operate on the economies of scale, customizations are usually not part of sales packages. Subscription plans are anchored on different price terms that offer different benefits per price point. More expensive subscription plans usually offer more benefits and advantages over lower-priced subscription plans.

Get the best RFP

A multi-million RFP will definitely get service providers scrambling with their best offers, but companies looking to outsource some or most of their operations need to keep in mind that clear-cut, well-defined RFPs can set the stage for professional and detailed negotiations.

One of the world’s leading outsourcing consultancy firms, TPI Inc., says a good RFP enables companies and service providers to “align their interests.” “When you issue an RFP, you’re signaling that you are willing to pay for certain services. Lots of service providers will be interested, especially in the payment part. You’re interested in the services part.”

TPI lists five guideposts that can help companies in getting the best RFP:

1. Outline exactly what you need in the RFP. A detailed RFP will go a long way in preparing an organized negotiation. Involve the departments in drafting the RFP. If the RFP will affect the marketing department, then they should have a say in it. Also, a vague RFP can be used as an excuse by a service provider in jacking up their bid.

2. Stick to a schedule in issuing an RFP. Asking for RFPs signals the onset of negotiations between a company and service providers. A well-defined schedule helps the company in controlling the whole RFP process. Keeping to the schedule in earnest shows that the company is “serious and organized” about the RFP.

3. Gather data as comprehensively as possible - and provide this with the RFP. TPI says, “you get what you pay for.” A high quality RFP can also expect high quality bids from service providers. Having clear, reliable data also helps to prevent service providers from making assumptions in their bids.

4. Enforce your rules: steer clear of service providers who do not toe the line. There are service providers that play mind games with company executives, spreading fear, uncertainty, and doubt to get another chance at bidding after being rejected. Executives must be able to deal professionally with such providers, walking away if they must.

5. Establish a structured decision process. TPI recommends creating a trustworthy team that will decide at pre-defined checkpoints in the process, such as downselecting bidders, negotiations, due diligence, etc. At the onset, involve the business, procurement, and legal departments. Stop other executives from being “tourists”, walking into meetings to offer their counsel. There’s a difference between involvement and commitment.

Cost Efficiency a Huge Factor for CIOs

Cost efficiency remains the strongest factor in the decisions of most CIOs looking to shift IT work offshore, says leading outsourcing research firm Gartner in their list of top 30 countries for IT offshore outsourcing.

The 2011 list contains eight new entrants – developing countries that offer low-cost IT services and whose governments are improving their support for the industry – Mauritius off Africa; Bangladesh, Sri Lanka, and Turkey in Asia; Bulgaria in Europe; and Colombia, Panama, and Peru in South America.

"It's a reflection that most organizations are looking for countries that offer some cost advantage," explains Ian Marriott, Gartner vice president for research.

Among the developed countries not in the list include Australia, Canada, Ireland, Israel, New Zealand, Singapore, and Spain. "They will have benefits that they can leverage, but they won't be saying, we're cheaper than India, China, Brazil and so on," he comments.

Although these new entrants are definitely cheaper, these locations scored poorly against Gartner’s criteria for data and intellectual property security. "It does take time to put protections into legislation and to get that legislation through the courts, so privacy and security protections remain a challenge," Marriott says.

Multinational companies that have chosen to establish operations in these locations "tend to wrap their own corporate standards around the location," he explains. “They manage security the same in the Ukraine as they do in the U.S."

Cost Efficiency a Huge Factor for CIOs

Cost efficiency remains the strongest factor in the decisions of most CIOs looking to shift IT work offshore, says leading outsourcing research firm Gartner in their list of top 30 countries for IT offshore outsourcing.

The 2011 list contains eight new entrants – developing countries that offer low-cost IT services and whose governments are improving their support for the industry – Mauritius off Africa; Bangladesh, Sri Lanka, and Turkey in Asia; Bulgaria in Europe; and Colombia, Panama, and Peru in South America.

"It's a reflection that most organizations are looking for countries that offer some cost advantage," explains Ian Marriott, Gartner vice president for research.

Among the developed countries not in the list include Australia, Canada, Ireland, Israel, New Zealand, Singapore, and Spain. "They will have benefits that they can leverage, but they won't be saying, we're cheaper than India, China, Brazil and so on," he comments.

Although these new entrants are definitely cheaper, these locations scored poorly against Gartner’s criteria for data and intellectual property security. "It does take time to put protections into legislation and to get that legislation through the courts, so privacy and security protections remain a challenge," Marriott says.

Multinational companies that have chosen to establish operations in these locations "tend to wrap their own corporate standards around the location," he explains. “They manage security the same in the Ukraine as they do in the U.S."